Ahead of the Union Budget, here is a preview by IIFL Wealth Management:

The timing couldn’t have been better. The Sensex and Nifty soared to record highs after a bout of volatility at start. The IMF projected a 7.4 per cent and 7.8 per cent growth rate for India in 2018 and 2019 respectively. This makes India one of the fastest-growing country among emerging economies. All this just ahead of Prime Minister Narendra Modi’s address at a roundtable of 40 CEOs of global companies at the annual World Economic Forum where he said India means business and presented an exciting opportunity for global businesses. The outlook is a smart start. Volatility could remain ahead of the F&O adjustments on Thursday. US markets ended higher after the three-day government shutdown ended. Can Fin Homes, United Spirits, Indiabulls Housing and RBL Bank are set to report their quarterly numbers today.

In the last full budget before the 2019 general elections, capital market investors would be keen to know of the government’s stand on two critical issues: fiscal consolidation, and, tax burden on capital market investments.

On the former, we expect the Finance Minister to stick to the three per cent fiscal deficit target for FY19. While the government is widely expected to overshoot the FY18 target, the math still seems workable for maintaining next year’s mark. It’s pertinent to note that it would still be among the lowest deficit levels in last three decades.

On the latter, in what’s a recurring pre-budget fear each year, there’s a possibility of the government maintaining status quo. But if it decides to address the issue, we hope it tries to revise and align taxes, not merely add yet another income source.

On the spending front, notwithstanding the fact that we are just 15 months away from general elections, we expect the finance minister to be categorically pragmatic, focused on asset creation and economy boosting spends like infrastructure and on rejecting wasteful expenditure. In this context, Hon. Prime Minister’s recent media byte sounds reassuringly pro-reform, where he remarked that it’s a popular myth that the common man invariably expects freebies and sops from every budget. Among other things, this budget could include crucial measures to make Railways more self-sufficient, stressing on generating internal resources to fund its plans and priorities.

The government’s income projections have been consistently plausible in the past few years. This time we expect slightly more aggressive estimates, which the government would strive to meet through widening of tax base and imposing penalties on basis of demonetisation data and high disinvestment income. Overall, we expect a well-balanced Budget. We would also like to underline the fact that the Budget won’t be the sole platform for launching reforms and we could see a string of positive measures from the government during the course of the year.